Van Eck Global - Since 1955

Unconstrained Emerging Markets Bond FundEMBUX

  • Daily Price   as of 07/28/2014

    NAV DAILY CHANGE
    $9.14  $0 / +0.0%
  • Class I Details: EMBUX

    INCEPTION DATE GROSS/NET EXPENSES1
    07/09/12 1.02%/0.95%
  • Monthly Commentary: June 2014

    Angel Falls

     By: Eric Fine, Portfolio Manager  

    The Fund’s biggest winners were Venezuela and Brazil in hard-currency and Israel in both local-currency and hard-currency. The Fund’s biggest losers were positions in Argentina, Indonesia, and Uruguay.  

    The first news is that the ECB moved to a negative deposit rate in the face of continuing demand weakness, and a view that inflation pressures are benign. In our view, a key effect of this remains that it represents a revolution in central bank thinking and behavior; only Denmark has made such a move. If one reserve-currency central bank (the Fed) uses money quantity as a tool, and the other reserve-currency central bank (the ECB) eliminates the zero percent floor for interest rates, then everything is now theoretically on the table in terms of future responses by all central banking authorities. More specifically though the Fed’s quantitative tools effectively anchored the long end of bond curves, and now the ECB’s tool should anchor the front end, perhaps for several years. Anchoring the front end is different and important, as it means actual derivative contracts and bonds may roll down to an even lower rate in a certain time horizon. In short, the ECB’s move may be good for global bonds and for duration.

    The Fed’s communications seem increasingly at odds with strengthening U.S. data. The bond market’s rally and sell-off are testament to this. We see this tension as likely to persist because the longer it continues, the closer we could get to a mature economic recovery set to turn downward. If the Fed waits long enough, historically normal recoveries point to an eventual downturn that may make tightening discussions problematic. Related to this, if the Fed does begin to tighten (or communicate in that direction), it may mark a major change in what we believe is the most important determinant of all asset prices, and any resultant adverse feedback may put downward pressure on longer term yields, and even risks backfiring completely. In our opinion, this tension is likely positive for the U.S. dollar over the Euro, and points to volatility for duration.

    The ECB’s easing and the Fed’s dovish communications could point to emerging markets currencies (EMFX) strength, challenging our view of owning hard-currency over local-currency. The ECB seems to be forcing savers out of cash and investors out of the front-end of the yield curve and into anything else. The Fed has already done this but is saying it could continue to do so. This combination typically points to a major risk-on trade, and EMFX and other risk trades behaved accordingly in the days surrounding these developments.

    Read full June Commentary >>  

  • Video Viewpoint

    Global Research: Highlights from Eastern Europe

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "Even though large parts of the region benefit from growth recovery in the euro zone, especially Germany, there are two large economies, Russia and Turkey, where the growth dynamics remain extremely anemic."


    View now »


    Global Research: Poland

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "I think Poland is uniquely positioned to benefit from Germany's rebound... My key concern about Poland, however, is potential exposure to change in sentiment from political risks in Ukraine."


    View now »


    Global Research: Hungary

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "The shift in my outlook for Hungary has been fairly dramatic… the government, together with the central bank implemented fairly aggressive and large-scale funding for lending programs but I have yet to see the results in terms of stronger growth in Hungary."


    View now »


    Global Research: Turkey

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "The macroeconomic fundamentals in Turkey are getting worse. Turkey is vulnerable, but it’s always been vulnerable. It’s never had enough reserves. Its real interest rates have never been that satisfying. But the political context is the worst I’ve seen in twenty years."


    View now »


    Global Research: Romania

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "My outlook on Romania did not necessarily change for the negative but certain red flags were raised during my trip."


    View now »


    Global Research: Ukraine

    Eric Fine and Natalia Gurushina
    Portfolio Manager and Economist, Van Eck Unconstrained Emerging Markets Bond Investment Team


    "The scenario of civil war and perhaps a civil war that has broader implications for the region is a scenario we have to think about. It's hard to assign probabilities to that, but the market seems to be saying it's a zero and I think zero is definitely the wrong answer."


    View now »


    How Will Tapering Affect EM Bonds?

    Eric Fine
    Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund


    “I don't have a blanket answer that says the taper is just not an issue for EM, but I do think it's been priced in generally. I think some countries have been able to react, and if tapering's happening because of good final demand, because economies are growing, then that's a high-quality problem for EM countries.”


    View now »


    Global Research: Indonesia, Malaysia, Philippines, and Vietnam

    Eric Fine
    Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund


    “A big attraction for Japanese and Korean investments in China is low wages. There are substantial and continuous wage pressures in China and that brings a big challenge for existing investments. The countries that I visited are all seeing substantial interest and in many cases are already seeing inflows from Japan.”


    View now »


    Why Unconstrained Approach to EM Bond Investing?

    Eric Fine
    Portfolio Manager, Van Eck Unconstrained Emerging Markets Bond Fund


    “In one word, the value of an unconstrained approach to emerging markets bond portfolio investing is ‘flexibility’. The market changed a lot in the past 20 years. At first, it was only hard currency bonds. Then came hard currency corporates followed by local currency sovereigns. Nowadays, local currency corporates are becoming more prominent. Having an unconstrained mandate is key to optimizing the portfolio using all four sub asset classes.”


    View now »


  • Emerging Opportunities

    Seedling

    Improvements in economic policies, strong balance sheets and improved creditworthiness of local governments continue to foster a strong case for investment in the emerging markets bonds.

     

      Emerging Market Bonds Defined 

     

    “Emerging Markets Hard Currency Bonds” are bonds denominated in foreign currencies that are generally widely accepted around the world (such as the US Dollar, Euro or Yen).

     

    “Emerging Markets Local Currency Bonds” are bonds denominated in the local currency of the issuer.  

     

    “Emerging Markets Sovereign Bonds” are bonds issued by national governments of emerging countries in order to finance a country's growth.  

     

    “Emerging Markets Quasi Sovereign Bonds” are bonds issued by corporations domiciled in emerging countries that are either 100% government owned or whose debts are 100% government guaranteed.  

     

    “Emerging Markets Corporate Bonds” are bonds issued by non-government owned corporations that are domiciled in emerging countries.

     

    Long term, an allocation to emerging markets bonds may provide diversification benefits as emerging markets fixed income tends to be less correlated to developed market fixed income.

  • Making the Investment Case

  • Important Disclosure 

    Unless otherwise stated, portfolio facts and statistics are shown for Class A shares; other classes may have different characteristics. 

    NAV: Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Fund is the Net Asset Value (NAV) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase.  No sales charge is imposed where Class A or Class C shares are issued to you pursuant to the automatic investment of income dividends or capital gains distribution. It is the responsibility of the financial intermediary to ensure that the investor obtains the proper “breakpoint” discount. Class C, Class I and Class Y do not have an initial sales charge; however, Class C does charge a contingent deferred redemption charge.  See the prospectus and summary prospectus for more information.

    1Van Eck Associates Corporation (the “Adviser”) has agreed to waive fees and/or pay Fund expenses to the extent necessary to prevent the operating expenses of the Fund (excluding acquired fund fees and expenses, interest expense, trading expenses, dividends and interest payments on securities sold short, taxes and extraordinary expenses) from exceeding 1.25% for Class A, 1.95% for Class C, 0.95% for Class I, and 1.00% for Class Y of the Fund’s average daily net assets per year until May 1, 2015. During such time, the expense limitation is expected to continue until the Board of Trustees acts to discontinue all or a portion of such expense limitation.

    2The J.P. Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM) tracks local currency bonds issued by Emerging Markets governments. The index spans over 15 countries. The J.P. Morgan Emerging Markets Bond Index Global Diversified (EMBI) tracks returns for actively traded external debt instruments in emerging markets, and is also J.P. Morgan’s most liquid U.S-dollar emerging markets debt benchmark.

    3Average Yield to Worst measures the lowest of either yield-to-maturity or yield-to-call date on every possible call date. Effective duration takes into account that expected cash flows will fluctuate as interest rates change. Effective maturity is the length of time until a fixed income investment returns its original investment. Distribution Yield is the amount of cash flow paid out and is calculated by dividing the annual income (interest or dividends) by the current price of the security. Averages are market weighted. These statistics do not take into account fees and expenses associated with investments or the Fund.

    The views and opinions expressed are those of Van Eck Global. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary.

    You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. The Fund is subject to risks associated with its investments in emerging markets securities. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. As the Fund may invest in securities denominated in foreign currencies and some of the income received by the Fund will be in foreign currencies, changes in currency exchange rates may negatively impact the Fund’s return. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. The Fund may also be subject to credit risk, interest rate risk, sovereign debt risk, tax risk, non-diversification risk and risks associated with non-investment grade securities. Please see the prospectus and summary prospectus for information on these and other risk considerations. 

    Investing involves risk, including possible loss of principal. An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing. Bond and bond funds will decrease in value as interest rates rise. The prospectus and summary prospectus contain this and other information.  Please read them carefully before investing. 

    Not FDIC Insured — No Bank Guarantee — May Lose Value 

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    New York, NY 10017
    800.826.2333